Flipkart taps more first-time premium buyers with EMIs, exchange, buybacks

Move to prompt customers to upgrade their smartphones quicker, will also lock them in with Flipkart

India's largest e-commerce marketplace Flipkart is looking to get more first time online shoppers to buy from it with offerings such as no-cost equated monthly instalments (EMIs), guaranteed buybacks and product exchange. This will also help reduce its reliance on offering discounts to boost sales.

In its most recent Big 10 sale, the company saw 70 per cent of all smartphone buyers opt for at least one of the three offerings, helping increase the average selling price of smartphones by as much as 25 per cent to Rs 12,000 from Rs 8,000-9,000 during the five day long sale that ended on May 18.

"Flipkart has always been at the forefront of innovating and thinking of how to lower the cost of ownership for consumers. We were the first to come out with cash on delivery (COD) and that helped build consumers trust, during the Big 10 sale we saw assured buybacks doing that," said Ranjith Boyanapalli, vice president for products at Flipkart.

While no-cost EMI has been around for a while on Flipkart, it has expanded the scope of the service from just being offered on select smartphones, to any products in a customer's cart if the value exceeds Rs 4,000. 

Boyanapalli says the move helped boost sales across categories such as electronics, large appliances and even apparel during the most recent sale.

Assured buybacks, a service tested with the launch of the Moto G5 Plus smartphone in March, was expanded to several top smartphone models during the sale. 

The move will prompt customers to upgrade their smartphones a lot quicker and will also lock them in with Flipkart when it comes to purchasing their next device.

"Technology is changing so fast and because of that what is happening is a customer is stuck with a particular phone. Product exchange helps lower the cost of upgrading and assured buyback takes that to the next level, by promising users a fixed price up front when they're buying the device," added Boyanapalli.

Rather than reducing the prices of high-value items such as premium smartphones to get a small set of customers buy into them, Flipkart believes offering better financing schemes and lowering the cost of the device with exchanges will get even mid-level buyers to upgrade. 

While the theory has already seen some success in smartphones, the company wants to do this with categories such as large appliances and furniture as well.

With the onset of consolidation in India's e-commerce space as Flipkart gears up to buy Snapdeal, experts are of the notion that the days of discounting to buy customers is over. 

With all large players — Flipkart, Amazon and Alibaba having access to long-term capital, the focus will be on growth over the next five years to a decade rather than on short term market share gains.

"The sector has matured and so has the management at these firms. It's no longer about only buying customers by throwing discounts. They are definitely being pushed by investors as well to look at creating healthy business models," said Devangshu Dutta, chief executive at consultancy Third Eyesight.

During the Big 10 sale, Flipkart says the average transaction size for electronics grew by two times, for electronic accessories it grew by four times and for lifestyle product it was three times, thanks to no-cost EMI and product exchange. 

For washing machines and refrigerators, the company saw seven out of ten customers opting for exchange which reduced the price of their purchases between 12-15 per cent.

"We will continue to push the bar on even more dimensions to improve customer experience. In that affordability plays a really big role which is why we've launched these things," said Boyanapalli.